Vodafone to pay taxes or face asset seizures

The I-T department has issued Vodafone a reminder over its Rs 14,200-crore tax demand and threatened to seize assets in the case of non-payment, a move the UK firm said shows disconnect with Prime Minister Narendra Modi’s promise of a tax-friendly environment.

The department on February 4 sent a notice to Vodafone International Holdings BV seeking Rs 14,200 crore in taxes, which it says are due from its $11 billion acquisition of Hutchison Whampoa’s India telecom business in 2007.

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After serving a Rs. 14,200 crore tax demand reminder to the company in a long-running dispute, the Income Tax Department on Tuesday sought to play down the notice saying it was “part of a normal process”.

A senior tax department official said that the government is keen to have a predictable and stable taxation regime as envisaged by Prime Minister Narendra Modi, even as the company asserted that the “reminder” goes against the promise of “a tax-friendly environment”.

The department has issued telecom giant a reminder for what it claims to be Rs. 14,200 crore capital gains tax dues and has threatened to seize assets on non-payment.

“We can confirm that we have received a tax reminder from the Tax Department that also references asset seizures in the event of non-payment,” a Vodafone spokesperson said.

Vodafone’s Issue :

The British telecom major has disputed the tax demand over its acquisition of 67% stake in Hutchison, now called Vodafone India, arguing that no tax was due as the transaction was conducted offshore.

But the tax department’s contention is capital gains were made on assets in India.

“The Indian government stated in 2014 that existing tax disputes, including ours, would be resolved through the existing judicial process,” Vodafone said in the statement.

the company has been fighting Indian tax authorities for years over its purchase of billionaire Li Ka-shing’s mobile-phone business in the country during 2007 in a case that analysts have said may influence foreign investors’ perceptions about India.

It’s not immediately clear what the government’s next steps would be if Vodafone were to decline the payment request.

Vodafone, the second-largest mobile carrier in India, began international arbitration proceedings on the tax bill in 2014. It’s the biggest of three disputes Vodafone has had with India’s government under Prime Minister Narendra Modi’s predecessor.